Scarnati's proposed Marcellus 'impact fee' is the pragmatic option

I was skeptical when I heard the first whispers about state Sen. Joe Scarnati’s “impact fee” proposal. Was this just a watered-down attempt to appease the overwhelming majority of Pennsylvanians who support a severance tax on the Marcellus Shale industry, I wondered?

Having now seen the details, I can honestly say it’s a legitimate plan, not a charade.

Senator Joe Scarnati

Sen. Scarnati has done the seemingly impossible and crafted a fee (code word for tax) that will collect significant revenues from the industry yet could be signed by Gov. Tom Corbett with a straight face. It’s not perfect, but in politics, sometimes you have to get on the train that’s moving or else you aren’t going to get anywhere.

Here’s why the Scarnati bill deserves the public’s support:
1. Revenues. It would bring in an estimated $76 million this year, $103 million in 2012 and $127 million in 2013. That’s higher than the low-ball Senate proposal last year and in the range of the final compromise that Gov. Rendell and lawmakers tried to patch together last fall (although it would bring in less in later years). It would put Pennsylvania well under West Virginia’s tax and very competitive against Texas and Arkansas.
2. No deductions or loopholes. In the severance tax debate last fall, the emerging compromise was a tax that gave the industry plenty of deductions: for production costs, capital recovery and even transportation costs. It was a field day for accountants and lawyers to manipulate.

The proposed fee has none of that. It’s as straightforward as you can get: $10,000 per well plus a levy based on production and a levy based on the gas price. The more drillers produce, the more money Pennsylvania gets. Similarly, the higher the gas price goes, the bigger the cut Pennsylvania gets. That’s pretty logical.

3. The money goes (mostly) to the right places. There are many opinions on where the money should go, but the two areas that just about everyone agrees deserve compensation are localities impacted by the drillers and the environment.

Anyone who has driven in the Marcellus Shale region knows the roads are getting torn up. There are direct infrastructure impacts. There also is more likelihood in those areas of adverse environmental effects. Scarnati’s bill would give about 60 percent of revenues to municipalities and counties where drilling takes place.

Similarly, the greatest concerns over drilling are how to best protect the state’s waterways, air and landscape. The remaining 40 percent of the fee funds would go toward statewide environmental initiatives.

4. Gov. Corbett might sign it. This proposal meets the governor’s criteria that he has said until he is blue in the face: It’s not a tax, and no revenues go into the general fund. Scarnati cleverly has the Public Utility Commission collect and administer the fee.

Scarnati had lunch with Gov. Corbett on Monday and reports that “I have a caution light [to continue]. No red light. No green light.”

This is not to say the proposal is flawless. A few tweaks would make it better. Under the proposal, money for statewide environmental initiatives would go through the Commonwealth Financing Authority and state conservation districts. The big question is why not put money toward Growing Greener? That is the highly successful project started under Gov. Tom Ridge and renewed under Gov. Rendell.

Another curiosity is why no money would go toward the Department of Environmental Protection nor the Department of Conservation and Natural Resources, both of which are on the frontlines of overseeing the industry yet have had their budgets cut in recent years.

Heather Long

Finally, there is an odd municipal zoning stipulation in Scarnati’s proposal that needs a lot more scrutiny. Any municipality that adopts a zoning ordinance that exceeds certain “standards” that are set forth in the legislation would be ineligible for impact fee funding.

The measure is supposedly targeted to ensure places such as the city of Pittsburgh, which banned drilling, won’t get a dime. But it could end up hamstringing even municipalities that do have drilling if they have restricted drillers from operating in certain areas — such as near streams. That doesn’t seem right.

In graduate school, we had an unofficial motto about our theses, “done is better than perfect.” It applies well to the Marcellus Shale severance tax or fee.

Everyone has their preference for what it should look like and where the money should go, but getting something reasonable enacted by this summer is better for Pennsylvania than waiting years to get it perfect. Scarnati has offered the best chance at doing that.
Heather Long is deputy editorial editor. 255-8104 or hlong@patriot-news.com.